In perhaps the most expensive residential tax-appeal case in Montana history, a California real estate mogul is asking a state board to reduce the assessed value of his Flathead Lake island home by $32 million.

If the board agrees, Don Abbey of La Mirada, Calif., would see the parcel’s annual property tax bill of $367,700 reduced by at least two-thirds.

Last week, a dozen attorneys and expert witnesses spent three days before the State Tax Appeal Board in Helena arguing whether the state properly assessed Abbey’s extravagant home and other structures on Shelter Island.

Abbey built the home and boathouse in 2011 and has it listed for sale, with an asking price of $59.5 million, which also includes most of the wooded island just off the western shore of Flathead Lake near Rollins.

The state says the 24,000-square-foot, three-story home and other “improvements” on the island, such as a 5,000-square-foot boathouse and apartments, are worth $41.8 million, and is levying property taxes based on that value.

A Missoula appraiser hired by Abbey said the home and other structures should be assessed at $9.8 million.

Once attorneys for both sides submit final, written arguments next week, the two-member board will have 90 days to make a decision — which is almost certain to be appealed to state District Court, by one side or the other.

Abbey, who appeared at last week’s hearing, is arguing the Revenue Department improperly valued the property for several reasons.

Department appraisers compared the property to similar properties outside the state but didn’t make adjustments for its Montana locale, he said.

His lawyers also argued that the agency failed to account for something called “functional obsolescence.” The property has been “overbuilt” to Abbey’s specifications, such as the two-foot-thick stone walls, but those amenities don’t add value to the house because any buyer may not want to pay for that preference, they say.

William VanCanagan, a Missoula lawyer representing Abbey, said Wednesday they also presented expert testimony alleging that “excessive” valuation of homes like Abbey’s will discourage wealthy individuals from coming to Montana and contributing to the local economy.

“If the message to prospective residents of Montana is that they’re not going to be taxed fairly, they’re not going to come here,” he said.

The state rejected the functional-obsolescence argument, saying that whoever buys the property would consider the quality of the construction.

“[We] determined that there is value in high-quality construction and design and architecture, and that there is a market of buyers who understand value, and that there is a market of people out there who want quality,” said Dan Whyte, an attorney for the Department of Revenue. “So, no reduction [in the assessed value] is necessary.”

The state hired its own experts from Mercer Island, Washington, who have plenty of expertise in appraising high-value properties, Whyte said. They disagreed with the appraisal prepared by Abbey’s expert in Missoula, he said.

Abbey has been paying taxes under protest on the island property since 2012, when the assessment was issued. He also owns two other parcels on the lake’s west shore, near Shelter Island, assessed at a collective $2.7 million.